ARK Invest and 21Shares have recently updated their application for a spot Ether exchange-traded fund (ETF), removing plans to include staking mechanisms as part of the fund’s operations.
Previously, the proposal indicated that 21Shares might engage in staking some of the ETF’s assets through third-party providers, as stated, “Sponsor may, from time to time, stake a portion of the Trust’s assets through one or more trusted Staking Providers.” However, this language has been omitted from the latest submission.
The February 7 version of the filing also referenced potential earnings from staking, noting, “21Shares anticipated receiving ETH as a reward for staking and intended to classify the resulting earnings as income generated by the fund.”
This detail has also been removed, although the updated proposal still acknowledges potential risks like slashing penalties, the temporary inaccessibility of funds during bonding and unbonding periods, and possible impacts on Ether’s price.
Eric Balchunas, a Bloomberg ETF analyst, interprets this revision as possibly being a strategic refinement in response to feedback from the U.S. Securities and Exchange Commission (SEC), though no official comments from the SEC have been disclosed.
Balchunas also suggested that removing these elements could be a strategic move to minimize reasons for the SEC to potentially reject the application.
The application, initially filed in September 2023, seeks to provide investors direct exposure to Ether and would have shares traded on the Cboe BZX Exchange, utilizing the CME CF Ether-Dollar Reference Rate – New York Variant.
The trustee named in the filing is Delaware Trust Company, with Coinbase Custody Trust Company holding the underlying Ether assets.
ARK Investment Management is involved as a sub-adviser, tasked with marketing the shares.
Regarding the broader regulatory landscape, the SEC has exhibited a cautious approach towards cryptocurrency ETFs. They delayed decisions on similar proposals from Invesco,
Galaxy, Grayscale, Franklin Templeton, VanEck, and BlackRock.
With a final decision on VanEck’s spot Ethereum application due by May 23 and Ark and 21Shares’s proposal on May 24, the atmosphere remains tense.
Despite the approval of spot Bitcoin ETFs on U.S. exchanges since January, the likelihood of an approval for spot Ethereum ETFs has been reduced, with analyst Balchunas adjusting his expectations for approval by late May from about 70% to 25%.
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